DOL Lawsuit Highlights Simple Reality: Employers Who Ignore FMLA Regulations Face Severe Consequences

by Franczek Radelet P.C.

rapids flip over.jpgWhen an employer ignores the FMLA regulations as it ponders a termination decision, the consequences can be severe. 

A water bottling company recently learned this the hard way. 

Peter Lyle was a route driver for "O Premium Waters," a company that provided bottled water.  In December 2009, Peter took FMLA leave, which was approved by the Company.  During his leave of absence, Peter's employer was acquired by D.S. Waters (d/b/a "Sparkletts"), also a water bottling company.  According to the Department of Labor, Sparkletts was a nearly identical company to its predecessor for purposes of the FMLA, so there should have been no break in FMLA coverage for Peter and any of his co-workers. 

Rather than return Peter to work upon conclusion of his FMLA leave, Sparkletts sent Peter down the raging rapids of termination.  What did the DOL find to be a big part of the problem here?  The new water bottling company retained 87 percent of the drivers from the previous company.  So, something was fishy here.  According to a DOL investigation, it determined that Sparkletts had a legal obligation to allow Peter to complete his FMLA leave and to restore him to the same or equivalent position, as required by the FMLA. 

The Court Case and Decision

In one of just a handful of FMLA cases recently filed by the DOL, it brought suit on behalf of Peter.  (Access the complaint here (pdf).)  After discovery between the parties, the DOL and the employer agreed to a consent judgment, which essentially is a type of settlement that ends the litigation with a judgment that is enforceable against the employer.  (Access the consent judgment here (pdf).)

Take note of the penalties involved: the consent judgment required Peter to be reinstated to his position, paid back wages and reimbursed for his medical expenses, which otherwise would have been covered had he remained employed. 

Insights for Employers

This lawsuit and consent judgment provide several pearls of wisdom for employers:

  1. Come on employers, we can get this right!  Whether it's an acquisition or reduction-in-force, employers should seek legal counsel where terminations are at issue.  Although we don't know all the facts here, this doesn't seem to be a close call.  Of course, FMLA leave itself does not act as a shield against any adverse action, but employers should have a darn good reason (with supporting documentation) for terminating an employee while he or she is on FMLA leave. 
  2. Is this a sign of things to come for the DOL?  The DOL's FY 2014 budget calls for more resources dedicated for FMLA enforcement, and the DOL's solicitor's office already has indicated we will see an increased number of FMLA lawsuits filed by the government in the time ahead.  Moreover, as we see in this case, the DOL will not hesitate to seek a broad range of damages -- even reinstatement -- where appropriate.  This reality makes it critical that employers self audit their FMLA policies, practices, and forms to ensure compliance with the FMLA and its regulations.  The regulatory and enforcement environment is only going to get more difficult in the time ahead, so money budgeted now for self-audits and training is money well spent. 
  3. Where acquisitions occur, pay attention to the "successor employer" regulations.  The FMLA regulations have very specific rules regarding whether a successor employer is bound by the FMLA obligations of the previous company.  Therefore, the acquiring company is well served to conduct the appropriate due diligence and seek legal counsel on their obligations as a successor employer under the FMLA and other employment laws.  For reference, the FMLA's "successor employer" regulations are as follows:

§ 825.107   Successor in interest coverage

(a) For purposes of FMLA, in determining whether an employer is covered because it is a “successor in interest” to a covered employer, the factors used under Title VII of the Civil Rights Act and the Vietnam Era Veterans' Adjustment Act will be considered. However, unlike Title VII, whether the successor has notice of the employee's claim is not a consideration. Notice may be relevant, however, in determining successor liability for violations of the predecessor. The factors to be considered include:

(1) Substantial continuity of the same business operations;

(2) Use of the same plant;

(3) Continuity of the work force;

(4) Similarity of jobs and working conditions;

(5) Similarity of supervisory personnel;

(6) Similarity in machinery, equipment, and production methods;

(7) Similarity of products or services; and

(8) The ability of the predecessor to provide relief.

(b) A determination of whether or not a successor in interest exists is not determined by the application of any single criterion, but rather the entire circumstances are to be viewed in their totality.

(c) When an employer is a successor in interest, employees' entitlements are the same as if the employment by the predecessor and successor were continuous employment by a single employer. For example, the successor, whether or not it meets FMLA coverage criteria, must grant leave for eligible employees who had provided appropriate notice to the predecessor, or continue leave begun while employed by the predecessor, including maintenance of group health benefits during the leave and job restoration at the conclusion of the leave. A successor which meets FMLA's coverage criteria must count periods of employment and hours of service with the predecessor for purposes of determining employee eligibility for FMLA leave.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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